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ASEAN Energy Policy: Case of Indonesia | Talk Energy
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ASEAN Energy Policy: Case of Indonesia

COUNTRY OVERVIEW

Indonesia is the largest country in Southeast Asia in terms of land area and population. It is 17,508 islands with a total land area almost two million square kilometers are inhabited by 237,641,326 people (BPS, 2010). Indonesia has experienced an increasingly strong economic expansion since recovering from the 1997 Asian financial crisis. Economic growth accelerated to a 10-year high of 6.5% in 2011 (BI, 2012), despite unstable global financial markets and a slowing world economy.

Map of Indonesia

As a consequence of the relatively high economic growth and rapid increase of population, energy consumption in Indonesia has been growing at a high rate. Although currently the country is one of the worlds’s largest producers and exporters of natural gas and coal, this former member of the Organization of Petroleum Exporting Country has to import the crude oil and petroleum fuel in order to meet the one-third of demand. Energy access is also one concern as per 2011, the electrification rate still laid on 73%. As fossil energy resources are finite, an efforts need to be undertaken to optimize the utilization of energy resources, especially the renewable energy sources where its potential is relatively abundant. With its relatively isolated islands and regions, provision of basic energy needs by renewable energy is an appropriate option.

ENERGY POLICY

Energy sector is crucial to the Indonesian, especially for economy sector, both for earning export revenue and for meeting domestic energy demand, and for national security. To that, the Government of Indonesia has to ensure sufficiency of domestic energy supply and to support sustainable development.

There are three consecutive layers for energy policy in Indonesia, as shown in the Figure below:

Three Layers of Energy Policy in Indonesia

The 1st Layer: The 1945 Constitution of the Republic of Indonesia

The 1945 Constitution of the Republic of Indonesia is the basic of all policies in the country including energy policy where it’s stipulated under Chapter XIV: The National Economy and Social Welfare, Article 33 (3) The land, the waters and the natural resources within shall be under the powers of the State and shall be used to the greatest benefit of the people.

The 2nd Layer: Associated Laws

With the 1945 Constitution as the reference, Indonesia has enacted several Laws related to energy, and some of the latest versions are: Law No. 22 Year 2001 on Oil and Gas, Law No. 27 Year 2007 on Geothermal, Law No. 30 Year 2007 on Energy, Law No.4 of 2009 on Mineral and Coal Mining, and Law No. 30 Year 2009 on Electricity.

Law No. 30 Year 2007 (Law No.30/2007) is the first specific legislature on energy as overall, while the others are more into specific issue. The Law No.30/2007 was enacted as on August 10, 2007 with special attention on new renewable energy development and energy conservation. This Law elucidates the principles where energy shall be managed under the principles of beneficial use, rationality, fair efficiency, value added enhancement, sustainability, people’s welfare, environmental functions preservation, national resilience, and integratedness by prioritizing the nation’s capability. This Law also provided a guideline on Management of Energy and Energy Management.

Furthermore, this Law stipulates the provision and utilization of new renewable energy should be increased by government and local government within their authorities. Provision and utilization of new renewable energy can get incentives from government/local government for a certain period until it reaches economical development stage. This Law also stipulates that energy conservation is the responsibility of the people and should be conducted from upstream to downstream. Central and local government will provide incentive and disincentive for the energy efficiency and conservation implementation by the energy consumer and producer of energy efficient equipments. International cooperation will be conducted to ensure national energy security.

Based on this Law, National Energy Policies shall cover the following issues: (a) availability of energy to meet the nation’s requirements; (b) energy development priorities; (c) utilization of national energy resources; and (d) national energy buffer reserves. On the basis of these national energy policies itself, as mandated by this Law, GoI shall develop a draft master plan on national energy.

In year 2006, in coherence with this Energy Law, GoI enacted Presidential Decree No. 5 Year 2006 on National Energy Policy and issued Blueprint of National Energy Management 2005-2025. Both of these provide the guidelines for the management of national energy which are among others: sets energy diversification targets for 2025 that include 5 percent biofuel, and 5 percent geothermal and other renewables, and energy conservation target of reducing energy intensity by 1 percent per year.

Currently, National Energy Council, which is established under the direction of Law No.30/2007, is drafting the New National Energy Policy. Advance from its previous version, which intends to promote efficiency, conservation, and environmental preservation, enhance the share of new and renewable energy resources on national energy mix, increase the access of people to energy, enhance the security of energy supply, optimize the utilization of domestic energy resources, and set and secure national energy buffer stock (strategic reserves), this draft will set the shifting paradigm in energy resource management from being treated as commodity to be a development capital.

The 3rd Layer: Implementing Rules

As called for by the Energy Law No.30/2007, especially on the issue of implementing rules for energy management, GoI issued Governmental Regulation No. 70 Year 2009 on Energy Conservation and the Presidential Instruction No. 13 Year 2011 on Energy and Water Conservation as the updated version from the Presidential Instruction No. 2 Year 2008 on Energy and Water Savings.

Governmental Regulation No. 70 Year 2009 on Energy Conservation regulates the responsibility and the role of the central government, local government, private sector and communities on energy efficiency, standardization and labeling, and implementation of energy efficiency i.e. implementing energy management for buildings and industries that consume energy intensively. This regulation also mandates the development of General Plan of Energy Conservation (RIKEN) as the guideline for the stakeholders to implement energy efficiency and conservation in Indonesia.

This Government Regulation obliges the large energy consumer, namely with the minimum consumption of 6000 TOE per year to implement energy management through (1) appointing energy manager; (2) develop energy conservation program within the company; (3) conduct regular energy audit; (4) implement the energy audit recommendation; and (5) report the result of energy management program to the authorities. This Regulation also stipulates the obligation for producers or importer of energy appliances to implement energy efficiency labeling.

Through Presidential Instruction No 13 Year 2011 on Energy and Water Conservation, it’s instructed to the leaders of Government Institutions both at central and local governments to measure water and energy saving. This Presidential Instruction is also the reference for the establishment of a National Team of Water and Energy Savings, which mandated with the target 20% on electrical saving, 10% subsidized fuel consumption saving, and 10% water saving.

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